<p><strong>By Subhadip Sircar</strong></p>.<p>Benchmark sovereign bonds gained in India after the central bank said it will buy long-end debt for a second week, stepping up the pace of its unconventional policy to lower borrowing costs.<br />The 10-year yield slid 7 basis points to 6.51%, taking the week’s drop to nine basis points.</p>.<p>The Reserve Bank of India is embracing a Federal Reserve-style Operation Twist, where it buys long-end debt while selling short-end bonds after five rate cuts this year failed to lift economic growth. It will conduct a second operation on Monday, following on its first such move earlier this week.</p>.<p>The announcement, which came late Thursday, was earlier than most traders expected, according to Anindya Das Gupta, Mumbai-based managing director and head of treasury at Barclays Plc.</p>.<p>“I think the expectation from Twist goes up to one trillion rupees,” he said. “The back-to-back purchases is probably to pace it if they have to do it over 10-12 weeks.”</p>.<p>The unprecedented move has put a stop to the relentless steepening in India’s yield curve, as investors dumped long-end debt on concern the government will add to record bond sales.</p>.<p>The spread between the two-year and 10-year debt is down to 72 basis points from 93 basis points before the first purchase under the plan was announced.</p>.<p>The RBI will buy 100 billion rupees ($1.4 billion) of 2029 bonds at the Dec. 30 auction, while selling a total 100 billion rupees of notes maturing in 2020.</p>.<p>The operation will flatten the yield curve further, reducing the term premium that had widened amid market concerns over India’s fiscal slippage, according to a Scotiabank note.</p>
<p><strong>By Subhadip Sircar</strong></p>.<p>Benchmark sovereign bonds gained in India after the central bank said it will buy long-end debt for a second week, stepping up the pace of its unconventional policy to lower borrowing costs.<br />The 10-year yield slid 7 basis points to 6.51%, taking the week’s drop to nine basis points.</p>.<p>The Reserve Bank of India is embracing a Federal Reserve-style Operation Twist, where it buys long-end debt while selling short-end bonds after five rate cuts this year failed to lift economic growth. It will conduct a second operation on Monday, following on its first such move earlier this week.</p>.<p>The announcement, which came late Thursday, was earlier than most traders expected, according to Anindya Das Gupta, Mumbai-based managing director and head of treasury at Barclays Plc.</p>.<p>“I think the expectation from Twist goes up to one trillion rupees,” he said. “The back-to-back purchases is probably to pace it if they have to do it over 10-12 weeks.”</p>.<p>The unprecedented move has put a stop to the relentless steepening in India’s yield curve, as investors dumped long-end debt on concern the government will add to record bond sales.</p>.<p>The spread between the two-year and 10-year debt is down to 72 basis points from 93 basis points before the first purchase under the plan was announced.</p>.<p>The RBI will buy 100 billion rupees ($1.4 billion) of 2029 bonds at the Dec. 30 auction, while selling a total 100 billion rupees of notes maturing in 2020.</p>.<p>The operation will flatten the yield curve further, reducing the term premium that had widened amid market concerns over India’s fiscal slippage, according to a Scotiabank note.</p>
